The Effect of News on Penny Stocks and Building a Watchlist
Penny stocks, defined as stocks trading under $5 per share, are known for their volatility and potential for significant returns. However, the low price of these stocks also makes them susceptible to dramatic price swings based on company-specific and industry news events. As such, keeping up with news flow is crucial for penny stock investors looking to profit while avoiding major losses.
Earnings Reports and Company News
For penny stocks, in particular, quarterly earnings reports can have an outsized influence on share prices. Low-priced stocks often represent young or distressed companies that are not covered extensively by analysts.
So, earnings announcements give investors critical glimpses into company performance. An earnings beat or surprise loss relative to expectations can cause penny stock prices to surge or plummet. Beyond earnings, other company updates like FDA approvals, clinical trial results, deals, and management changes can also cause big penny stock moves in both directions.
Investors should compile earnings dates and monitor newswires around these dates to capitalize on the volatility. Putting penny stocks reporting soon on a watchlist allows quick reactions to buy on positive news or sell on negative results before the market fully reacts. Company press releases and filings should also be tracked closely. Traders even monitor chat rooms and message boards for rumors preceding official news that may move the pennies.
Industry Trends and Developments
Industry-specific news and macroeconomic trends also filter down into penny stocks. Economic growth, interest rates, commodity prices, and regulatory shifts influence cheap stocks leveraged to those dynamics.
For example, oil penny stocks can rise and fall with energy prices and production levels. Gold and silver mining stocks track precious metal prices and mining industry costs. Biotech and pharma pennies sway on clinical trial data, drug approvals, and health policies.
To benefit from industry trends, traders should follow reporting on vital economic indicators, regulations, and events impacting relevant sectors. Having penny stocks across diverse industries can allow benefiting from the upside in outperforming sectors. Traders also watch specific indexes for signals – major moves in groups like biotech or metals penny stocks often precede shifts in specific companies.
This article looks at a handful of penny stocks with news. These recent developments have acted as catalysts and swayed sentiment in the stock market. Once you see the latest developments, you can decide if any are worth adding to your list of penny stocks to watch this month.
Penny Stocks To Watch
- Spectral AI Inc. (NASDAQ: MDAI)
- VS Media Holdings Ltd. (NASDAQ: VSME)
- SiriusXM Holdings Inc. (NASDAQ: SIRI)
- Opendoor Technologies Inc. (NASDAQ: OPEN)
Spectral AI Inc. (MDAI)
Ever since making its public debut, shares of Spectral AI have failed to hold gains. It has gone from IPO highs of $8.90 to recent lows of $2.20, even amid the boost of attention in AI stocks. Spectral focuses on medical diagnostics leveraging predictive AI technology. Its focus areas include burns, wound care, and diabetic foot ulcers.
MDAI Stock News
This week, MDAI stock popped after Spectral announced that it added Deepak Sadagopan to its Board of Directors. Sadagopan brings experience from other leadership roles, including at St. Joseph Health, Quest Diagnostics, McKesson, and Edifecs.
CEO Wensheng Fan said that it was a transformational period for our company.
“Deepak’s contributions will enable us to continue to accelerate our work in bringing our technology to doctors and patients in need. We welcome him to the board with great enthusiasm.”
VS Media Holdings Ltd. (VSME)
VS Media handles a global network of digital creators. They publish social media content, and the company provides creators with production facilities, training, and even funding to produce content.
VSME Stock News
This week, VS Media announced expansion into Macau to increase its exposure in Hong Kong and Taiwan. “We are thrilled to expand into Macau, a vibrant destination with rich cultural heritage and tremendous potential for growth,” said Tiffany Wan, Regional Vice President at VS Media.
In addition, VS formed a strategic partnership with MLink, a Macau-based hospitality services company. The duo will utilize their strengths to offer a complete marketing, content creation, and event management solution.
SiriusXM Holdings Inc. (SIRI)
The audio entertainment company has been a long-standing name in satellite radio. Shares have made a rebound over the last few sessions, thanks to recent M&A news.
SIRI Stock News
This week, the company announced the formal release date for its Q3 results. However, what has come into a more certain focus is the company receiving an offer from Liberty Media Corporation to combine Liberty’s Liberty SiriusXM tracking stock group with SiriusXM.
Analysts appear optimistic about the proposal. Deutsche Bank Securities said in a note that this will help the company achieve its goal of eliminating the net asset value discount.
Opendoor Technologies Inc. (OPEN)
Residential real estate eCommerce company Opendoor continued trading higher as the penny stock continued its recent uptrend. It recently reported financial results showing that Opendoor outpaced its 2022 Q2 earnings per share and topped sales estimates. However, some downtrodden Q3 revenue guidance weighed heavier on the penny stock.
OPEN Stock News
It hasn’t necessarily been company-specific news from management that helped boost attention on OPEN stock. An updated note from UBS analysts has come to light, which may have played a part in recent interest in this name. UBS said that Opendoor will likely meet its volume target and contribution margins by the middle of next year.
That would mean positive Adjusted Net Income “in the absence of macroeconomic fluctuations…We are not yet out of the woods on risks around housing pricing volatility,” and Opendoor may not reach revenue targets until 2025, UBS said. The firm currently has a Neutral rating on the company and a price target of $2.75.
Sorting Penny Stock Ideas: 7 Topics To Consider
When building a penny stock watchlist, look for companies exhibiting positive momentum ahead of impactful potential catalysts. Some clues to look for:
- Recent Earnings Growth – Rising revenues, earnings, or forward guidance can indicate fundamentals improving.
- New Products – Product launches, expansions, or pending approvals provide near-term catalysts.
- Technical Breakouts – Stocks crossing key resistance levels on increased volume signal upside follow-through.
- Insider Buying – Directors/executives purchasing shares can reflect an undervalued stock.
- Takeover Potential – Merger or buyout rumors provide upside speculation.
- Reversal Situations – Former high flyers that have sold off heavily could rebound.
- Analyst Upgrades – Higher recommendations indicate third-party validation.
Fundamental Improvements – Cost-cutting, debt reduction, or asset sales improving balance sheet.
Avoid penny stocks exhibiting warning signs like poor and worsening fundamentals, consistent losses, executive departures, and pending lawsuits or insolvency. Analyze company filings and releases to gauge financial health.
Optimizing Penny Stocks Watchlists
Organizing penny stock watchlists by sector, catalyst event, and timeframe can streamline research and trading. For example, group penny stocks by expected earnings dates or separate lists by industry. This allows for comparing news impact within similar stocks. Maintain different lists of penny stocks for both long-term holdings and short-term trading opportunities based on market cap, liquidity, and business fundamentals.
Focusing watchlists helps identify trading scenarios to capitalize on news events. For example, significant clinical trial results may present both long and short opportunities. Adding the stock to lists like “biotech breakouts” and “gap down risks” ahead of the event can prepare for either outcome.
Always apply proper position sizing, risk management, and trading discipline when trading penny stocks based on news events. Their inherent volatility makes them risky assets, so size positions appropriately and use stops to contain potential losses.
By closely monitoring company and industry developments, penny stock traders can ride news-driven momentum. However, combining diligent research with measured speculation is essential to build watchlists that uncover opportunities while limiting downside. The most successful penny stock investors strike a balance between risk and reward.